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Detailed Earnings Analysis:
Sea Ltd SE 0.00%↑

Financial Results
Key Points on Earnings Report
My thoughts

↗️$7,787.8M rev+48.1% YoY, +9.7% QoQ) beat est by 9.8%

↘️GM (45.6%, -0.2 PPs YoY)🟡

↘️Operating Margin (8.4%, -0.9 PPs YoY)🟡

↗️Operating Cash Flow Margin (19.3%, +2.0 PPs YoY)

↘️Net Margin (5.9%, -2.0 PPs YoY)🟡

↘️EPS $0.70 missed est by -6.7%🟢

Revenue By Type

Shopee Revenue

➡️$5,587.6M rev (+48.2% YoY, 72.0% of Rev) 🟢

↘️Operating Margin (2.9%, -1.2 PPs YoY)

Monee Revenue

➡️$1,402.8M rev (+58.9% YoY, 17.5% of Rev) 🟢

↘️Operating Margin (19.9%, -7.6 PPs YoY)

Garena Revenue

➡️$746.6M rev (+33.5% YoY, 9.8% of Rev) 🟡

↗️Operating Margin (54.1%, +4.9 PPs YoY)

Other Services

➡️$50.8M rev (+9.2% YoY, 0.6% of Rev) 🟡

↘️Operating Margin (-101.4%, -67.6 PPs YoY)

Key Metrics

Garena

↗️Online Games Bookings $764M (+15.5% YoY)🟡

↘️666.3 QAUs (+0.2% YoY, -0.2 QoQ)

↘️68.1 QPUs (+10.2% YoY, -4.5 QoQ)

Shopee

➡️GMV $38,300M (+28.5% YoY)🟡

➡️E-Commerce Orders $4,200M (+5.0% YoY)🟡

↗️Commerce Take Rate (14.6%, +0.9 PPs QoQ, +2.0 PPs YoY)🟢

Credit Portfolio

↗️Loans Principal Outstanding $11.1B (+60.9% YoY)🟡

↗️Provision for credit losses $555.2M (+71.5% YoY)🟡

↘️NPL90+ Ratio (1.0%, -0.1 PPs QoQ)🟢

↗️Cost of Risk (CoR) (Period-Average) (5.3%, +0.4 PPs QoQ)🟡

Operating expenses

↗️S&M/Revenue 21.3% (+2.1 PPs YoY)

↘️R&D/Revenue 4.0% (-1.6 PPs YoY)

↘️G&A/Revenue 5.1% (-1.1 PPs YoY)

Dilution

↘️SBC/rev 2%, -0.7 PPs QoQ

↘️Basic shares up 3.4% YoY, -0.2 PPs QoQ

↘️Diluted shares down -0.3% YoY, -0.5 PPs QoQ🟢

🟢Positive

Revenue reached $7.79B, +48.1% YoY, beat est by 9.8%.
Shopee revenue grew +48.2% YoY, and GMV increased +28.5% to $38.3B.
Shopee take rate increased to 14.6%, up 2.0 PPs YoY, supported by strong advertising monetization.
Monee revenue rose +58.9% YoY to $1.40B, loans increased +62% YoY to $11.1B.
Monee maintained a 1.0% 90-day NPL ratio despite rapid credit growth.
Garena revenue rose +33.5% YoY, and operating margin expanded 4.9 PPs to 54.1%.

🟡Neutral

Gross margin at 45.6%, down only 0.2 PPs YoY.
Operating cash flow margin improved 2.0 PPs YoY to 19.3%.
Shopee adj EBITDA increased +12% YoY to $255M, with >$1B expected for 2026.
Garena bookings grew +15.5% YoY to $764M, but declined QoQ.
Diluted shares declined -0.3% YoY, and basic shares remained 3.4% higher YoY.

🔴Negative

EPS of $0.70 missed est by 6.7%.
Operating margin fell 0.9 PPs YoY to 8.4%, and net margin declined 2.0 PPs to 5.9%.
Monee operating margin declined 7.6 PPs YoY to 19.9% despite strong revenue growth.
Revenue growth of +48% outpaced adj EBITDA growth of +11%, limiting operating leverage.
Monee credit expansion into Brazil and off-Shopee lending is increasing provisioning risk.
Garena heavily dependent on Free Fire, increasing franchise concentration risk.

Strong Q2 from SE, with shares rising 11% after earnings. Revenue growth accelerated to +48.1% YoY from +46.6% in Q1.

Gross margin has continued to improve for the past three quarters and reached 45.58%, roughly in line with Q2 2025. Operating Cash Flow Margin also improved both QoQ and YoY to 19.34%. Net Margin declined slightly to 5.88% due to investments in logistics, fulfillment, and credit expansion, as well as higher income tax expense of $451M. I do not see the decline in Net Margin as a problem. Sea is still in a growth stage, and reinvesting in future growth is the right decision.

All three core businesses delivered strong growth in Q2. Shopee growth accelerated to +48.2% YoY, Monee accelerated to +58.9%, and Garena revenue increased +33.5%.

Shopee is benefiting from strong advertising growth. Ad revenue increased 70%+ YoY, ad take rate expanded by more than 90 bps, ad-paying sellers increased 45%, and average ad spend per seller rose more than 15%. GMV growth also remained high at +28.5%. Shopee revenue is growing faster than GMV, which means platform monetization is improving. Commerce Take Rate increased to a record 14.6%.

Shopee operating margin declined to 2.9% due to investments in user acquisition, fulfillment, and logistics, but these investments are already producing results. Average monthly new active buyers increased 35%+ YoY, while fulfillment order volume increased more than 20% QoQ. Long term, management sees e-commerce operating margin at around 2%–3%.

Sea did not provide TPV growth data for Q2, but Monee growing faster than Shopee suggests successful fintech expansion outside Sea’s own platform. Off-Shopee SPayLater reached more than 20% of total SPayLater portfolio, while monthly transacting users on the standalone ShopeePay app more than doubled YoY.

Monee is a higher-margin business for Sea, with an operating margin of 19.9%, while Shopee remains a low-margin business at only 2.9%. Monee operating margin declined due to lower-margin lending products and expansion into new markets including Brazil, Thailand, and Malaysia. Management noted that off-Shopee lending carries lower margins than Shopee-based SPayLater.

Sea’s credit portfolio is growing rapidly at +62% YoY, while Monee maintained a 1.0% 90-day NPL ratio, which is a very strong result. During Q2, Monee added 5.3M first-time borrowers, while active credit users increased 34% YoY to more than 40M.

Garena remains Sea’s cash cow. Despite representing only around 10% of total revenue, Garena generates the highest operating profit. Operating margin increased to 54.1%, while revenue growth remained strong at +33.5%, although it slowed from +40.6% in Q1.

Main risk for Garena remains concentration in Free Fire, which attracts more than 100M average daily active users and remains the core growth driver. Palworld Online and Monster Hunter Outlanders could help diversify Garena’s revenue. Global rollout of Palworld Online and launch of Monster Hunter Outlanders are planned for 2026.

Management expects Shopee GMV growth of around +25% and expects adjusted EBITDA in H2 2026 to exceed H1 2026.

Sea Ltd Earnings Q2 2026

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